eqpprice

Instrument prices from Equal Probabilities binomial tree

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Syntax

[Price,PriceTree] = eqpprice(EQPTree,InstSet)
[Price,PriceTree] = eqpprice(___,Options)

Description

example

[Price,PriceTree] = eqpprice(EQPTree,InstSet) computes stock option prices using an EQP binomial tree created with eqptree. All instruments contained in a financial instrument variable, InstSet, are priced.

eqpprice handles instrument types: 'Asian', 'Barrier', 'Compound', 'CBond', 'Lookback', 'OptStock'. See instadd to construct defined types.

example

[Price,PriceTree] = eqpprice(___,Options) adds an optional input argument for Options.

Examples

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Open Live Script

Load the EQP tree and instruments from the data file deriv.mat. Price the put options contained in the instrument set. 

load deriv.mat; 
EQPSubSet = instselect(EQPInstSet, 'FieldName', 'OptSpec', ...
'Data', 'put')
EQPSubSet = struct with fields:
        FinObj: 'Instruments'
    IndexTable: [1x1 struct]
          Type: {5x1 cell}
     FieldName: {5x1 cell}
    FieldClass: {5x1 cell}
     FieldData: {5x1 cell}


instdisp(EQPSubSet)
Index Type     OptSpec Strike Settle         ExerciseDates  AmericanOpt Name  Quantity
1     OptStock put     105    01-Jan-2003    01-Jan-2006    0           Put1   5      
 
Index Type  OptSpec Strike Settle         ExerciseDates  AmericanOpt AvgType    AvgPrice AvgDate Name   Quantity
2     Asian put     110    01-Jan-2003    01-Jan-2006    0           arithmetic NaN      NaN     Asian1 4       
3     Asian put     110    01-Jan-2003    01-Jan-2007    0           arithmetic NaN      NaN     Asian2 6

Price the put options.

[Price, PriceTree] = eqpprice(EQPTree, EQPSubSet)
Price = 3×1

    2.6375
    4.7444
    3.9178


PriceTree = struct with fields:
    FinObj: 'BinPriceTree'
     PTree: {1x5 cell}
      tObs: [0 1 2 3 4]
      dObs: [731582 731947 732313 732678 733043]

You can use treeviewer to see the prices of these three instruments along the price tree.

Input Arguments

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Stock price tree structure, specified by using eqptree.

Data Types: struct

Instrument variable containing a collection of NINST instruments, specified using instadd. Instruments are categorized by type; each type can have different data fields. The stored data field is a row vector or character vector for each instrument.

Data Types: struct

(Optional) Derivatives pricing options structure, created using derivset.

Data Types: struct

Output Arguments

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Price for each instrument, returned as a NINST-by-1 vector. The prices are computed by backward dynamic programming on the stock tree. If an instrument cannot be priced, a NaN is returned in that entry.

Related single-type pricing functions are:

  • asianbyeqp: Price an Asian option from an EQP tree.

  • barrierbyeqp: Price a barrier option from an EQP tree.

  • cbondbyeqp: Price convertible bonds from an EQP tree.

  • compoundbyeqp: Price a compound option from an EQP tree.

  • lookbackbyeqp: Price a lookback option from an EQP tree.

  • optstockbyeqp: Price an American, Bermuda, or European option from an EQP tree.

Tree structure of instrument prices, returned as a MATLAB® structure of trees containing vectors of instrument prices and accrued interest, and a vector of observation times for each node. Within PriceTree:

  • PriceTree.PTree contains the clean prices.

  • PriceTree.tObs contains the observation times.

  • PriceTree.dObs contains the observation dates.

See Also

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Topics

Introduced before R2006a

Financial Instruments Toolbox Documentation

Support